What is What In Usage-Based Insurance Market in the USA?
Auto Insurance
You probably have heard or already known pay-as-you-drive (PAYD) or Pay-how-you-drive (PHYD), telematics, and Usage-Based Insurance (UBI). These terms are used for auto insurance programs that tailored to identify and reward based on driver individual driving patterns. The UBI insurance market is believed to be the norm in the future when the connected car technology becomes popular.
Today all major auto insurers have their UBI programs and push hard to market to adopt it. However, compared with the vision for the future that all cars will communicate through networks, today’s telematics seems still in its infant stage. For an insurance company, it is crucial to determining a fair and correct price for an insurance product (also called rate making or premium).
UBI First-Mover Advantages
There are several early-mover advantages to the insurers. First, auto insurers are able to attract self-revealed good drivers. Good drivers end in fewer car accidents that result in fewer claims and improved insurance profitability. Second, auto insurers are able to use the collected data for that usually demonstrates economies of scale in the long-run. Third, insurers based on data and insight can continue developing more features for their UBI products.
What clients are the first-adopters?
Drivers who drive less and carefully — fewer miles, less hard-braking, or hard-cornering incident, are the early UBI adopters. Current practice is that the policyholders usually consent the insurers to collect data through a device on their vehicles for 30–60 days. The data are used to track driving time and behavior. After 30–60 days and if qualified, the policyholders receive a discount for the annual premium. Day-time commuters, new car owners, young drivers who demonstrate good driving behaviors are the target customer segments.
How much data gives an insight into the user driving pattern?
Since the driving patterns of a driver are habitual and the telematics data are massive, it is sufficient to use 2–3 months of data of an individual driver to detect his/her driving patterns.
The Average Expenditure for Auto Insurance State by State US
Who is Who in the UBI Market
Here is the list of some US insurance programs to get the flavor of UBI
- Progressive’s Snapshot program: personalizes the rate based on the actual driving. In most states, you’ll get an automatic discount just for participating and a personalized rate at renewal depending on the results. Snapshot rewards drivers with an average discount of $145.
- State Farm: launched the Drive Safe & Save program. Users get a discount of up to 30% on your auto insurance. The UBI is based on smartphone telematics.
- Allstate: has surpassed 1.0 million active UBI policyholders. Drivewise is their program. The app gives insights into how user drives and rewards on everyday safe driving.
- Nationwide’s SmartRide program: rewards safe driving that avoids distractions and follows the rules of the road. The solution is based on beacon and application. The app gives personalized feedback to help to make safer driving decisions. Subscriber earns an instant 10% discount on the sign-up. The discounts you could get up to 40% they claim.
- Farmers: offer insurance telematics for commercial lines. For regular users, they also provide an app called — Signal. The Signal app allows to earn a 5% discount and up to 15% each time the policy renews, based on driver's safe driving. It also shares a reward program where user can win up to $100 in rewards each month, for keeping a driving score at 80% or better.
- State Auto: has a broad telematics portfolio. It is called Fleet safety 360 telematics. It gives a mobile application for a usage-based insurance program. It pairs a mobile application and a digital tag. Trip data is passed to the vendor’s data science and analytics engines, which generate personalized feedback for drivers.
- MetroMile: Customers who drive less than 10,000 miles a year in several US states. MetroMile’s pay-per-mile insurance product, called Metromile Pulse, offers a free wireless device that plugs into the vehicle’s OBD-II port to measure mileage. This product though tracks only mileage and does not track other driving behavioral factors. It charges a fixed monthly rate and a charge per mile.
- Esurance: DriveSense is Esurance’s mobile app that offers a usage-based insurance program. The app collects driving data including location, time of day, duration of the trip, and driving habits. It sends real-time feedback to customers for driving risks like speeding and sudden braking. Customers can view and manage the trip histories from the app.
- Travelers: IntelliDrive is Traveler’s mobile app. It captures the driving behaviors of the first 90 days covered on the policy. Safe drivers could save on the policy premium. The app score driving behaviors using a combination of factors including time of day, speed, acceleration, and braking.
- Safeco (a Liberty Mutual company): The RightTrack is its UBI program. It offers two options: 1. a plug-in device that connects to the OBD-II port of your car; 2. the mobile app. Once enrolled, the device or the app captures your driving behaviors for the first 90 days covered by the policy. A final discount will be calculated and applied to your auto policy. It results in savings between 5% and 30% off the premium. The risk score is built from the events associated with hard-braking, sharp turns, and nighttime driving (midnight to 4 am). The less you have of the abovementioned the better your score, the better the premium.
The potential for UBI growth
The Global Usage-based Insurance Market is estimated to grow at CAGR above 29 % over the forecast time frame 2019–2026 and reach the market value around USD 190 billion by 2026.
The usage-based insurance (UBI) market growth is attributed to the growing usage of smartphones, which are integrated with vehicle connectivity systems.
About Stemic Drive
Stemic Drive is a next-generation usage-based insurance (UBI) technology platform. We manage the full life cycle of data. From acquisition to transformation to analytics to insights for predictive insurance dynamic pricing. We are providing a risk score for the driver and fleet. We are targeting insurance companies that want to leap in UBI for their clients. We provide all the toolset and platform to run UBI business smoothly. Visit www.stemicdrive.com
